Home news FCA set to report on overdraft fees and payday loan cap

FCA set to report on overdraft fees and payday loan cap


The Financial Conduct Authority is set to indicate whether it is likely to change the rules for offering high-cost loans including overdrafts, door-to-door lending and payday loans.

The report – due to be published on Monday – follows a review of the sector by the financial watchdog.

One question is whether capped interest rates on payday lending have driven vulnerable consumers into borrowing from illegal loan sharks.

Overdraft fees are also of concern.

The watchdog’s definition of high-cost credit includes payday loans, home-collected credit, catalogue credit, some instances of “rent-to-own” lending for consumer goods, guarantor loans and pawn-broking.

Last November the FCA said it was launching the review into high cost loans in order “to build a full picture of how these are used, whether they cause detriment and, if so, to which consumers”.

Since then concerns have grown over high levels of personal debt.

The City regulator – the Financial Conduct Authority (FCA) – and the Bank of England have both warned of an acceleration in consumer borrowing, such as loans, overdrafts, credit card debt and car finance.

The FCA has said it is concerned that there is poor price transparency when it comes to overdrafts and over the nature and level of charges, especially for unarranged overdrafts.

Complaints about payday loans hmore than doubled over the last year, despite strict new regulations limiting interest charges.

Since the start of 2015, payday loan rates have been capped at 0.8% per day of the amount borrowed, and no-one has to pay back more than twice the amount they borrowed.

Source: BBC